Monthly Archives: January 2017

Oscar Wilde remarked that “To lose one parent may be regarded as a misfortune; to lose both looks like carelessness.” I wonder what he would say about breaking the record for annual temperature three years in a row.

Wilde was joking about the misuse of evidence, of course. I am joking about the failure to use evidence at all. Many of us are worried about the new American regime which appears to consist of an amazingly high percentage of climate warming deniers. There is a song with a chorus about them that most of us know, and it captures some of the frustration of living in a world with the willfully ignorant at the wheel.

Pete Seeger wrote “Where Have All the Flowers Gone” in 1955. At the time he was having trouble finding singing gigs because of a wild America swing to the right. McCarthyism was at its insane height at the time.

Seeger built his song on lines from a traditional Cossack folk song “Koloda-Duda.” Interestingly, the version most of us know is an expanded version with verses by a singer- songwriter I had never herd of, Joe Hickerson.

The chorus line I am talking about is, of course, “When will they ever learn?”

The real news is that some have learned. Our own Prime Minister has understood the problem and promised a carbon fee. The majority of Canadians are already living in province committed to taxing carbon fuels. (I don’t think the leaders in Canada really understand the economics of HOW to fight warming yet, but that is another issue).

The leaders of the most populous country in the world have also learned. Xi Jinping’s administration adopted “ecological civilization” as its slogan. At the Davos conference, China took the lead in calling for climate action. “If the U.S. does step back from leadership in the climate process then China will step forward, not least for pure realpolitik reasons,” according to Michael Liebreich, founder of Bloomberg New Energy Finance.

And maybe even the slowest are learning as well. China’s special representative for climate change, Xie Zhenhua, has said publicly that the incoming US president had “softened his tone on whether climate change is real” following his election in November.

I love Vic Fedeli – he is a nice guy and he is deeply committed to Northern Ontario. He is also deeply confused about climate change and what to do about it.

Vic is a conservative. That means he likes the price system and dislikes taxes. That puts him in a bind when the price system fails – for example when the environmental costs of burning fossil fuels don’t get added into the price that consumers pay.

The result is that consumers burn too much fossil fuels and cause too much global warming. Prices only do a good job of allocating goods when the prices are right. Science and economics tell us that gasoline prices are at least 25 cents a litre too low. Consumers are subsidizing their driving by dumping CO2 into the atmosphere.

Conservatives generally believe that people should pay for what they get. They don’t like free riders. By this measure, Vic should want to charge Ontario drivers quite a bit more for gasoline.

But Vic also dislikes taxes, so he doesn’t like the idea of a corrective tax on fossil fuels. A corrective tax is just a tax that makes consumers pay the full cost of the fuel they use. Poor Vic. This is a deep philosophical dilemma for him and for many conservatives.

As a Conservative, Vic should support a carbon tax to make the price system efficient. Then, as a conservative he should support giving all the tax revenue back to people as a per-capita grant. He would fix the price system and he wouldn’t take money away from people.

Instead Vic finds himself railing against the extra cost of a carbon tax: “The price of fuel is going to go up and everything that is delivered will also increase in cost,” said Vic.

So poor Vic is fighting against fixing the price system. He is fighting against individual responsibility. He is fighting against protecting the natural world he loves. He is fighting for policies that will increase global warming.

And he is doing this because he wants to win votes. He is taking a populist but very wrong position on the provincial cap and trade system.

He should instead be calling for a Conservative cap and trade policy: put a CAP on Glen Murray’s bureaucratic system and TRADE it in for a simple and effective Fee and Dividend system like the Greens, the Citizen’s Climate Lobby and his favorite economist (me) all suggest.

Between 2017 and 2020, the cap and trade system that Glen Murray loves will cost Ontarians — $8 Billion. That is about $600 per person.

That’s great. That is about one tenth of the subsidy Ontarians get for burning fossil fuels. I am very much in favour of taking back the subsidy.

But what shall we do with the $8 Billion? Give it to companies? Let Glen spend it? Or give it back to Ontarians?

My view is that we give it back. The cap and trade system is just a tax on consumers. Consumers use the fuel, and no matter what anyone says, the fuel suppliers will pass the cost on to consumers. Any company that uses fuel will pass the cost on to consumers. You have to be a bit stupid to think otherwise.

So give the tax money back to consumers. The goal is not to make people poorer, the goal is to make them better off by reducing the very dangerous effects of climate change. The government does not need to keep that tax revenue to fight climate change. In fact the government gets a double impact by giving the money back to consumers.

Some people will definitely cut back on fuel use with the tax but they will also spend some of their $200 per year buying lower carbon goods. Low-carbon products will be cheaper than high carbon goods with the carbon tax on fuels.

Glen argues that he has to keep his carbon tax revenues because he needs to spend them on mitigation measures. It isn’t clear that Glen is actually better at mitigation than the rest of the population, but it is clear that he does not need to use carbon taxes for these programs.

Any program that cuts emissions efficiently actually has the potential to make money: home insulation pays for itself; solar panels will soon pay for themselves. Wind power turbines in remote communities will pay for themselves. Since these are good investments, all the government has to do is lend money to people who want to save money. Lending money is cheap and, at least for banks, very profitable.

To get businesses to cut their emission just tell them that the tax will be very high very soon. Don’t do what Glen has been doing, telling people that gas prices will not rise much. That is counter productive. Are you going to buy an economy car if the Minister of the Environment is promising to keep fuel prices low? People buy bigger vehicles when fuel prices are low. Glen is actually promising exactly the wrong thing. He is undermining the Provincial program!!

To get people to accept high enough fuel prices you just have to give them their money back.

The Ministry estimates that Ontario households are expected to incur additional costs for fuel, such as gasoline and natural gas, of $156 in 2017 and about $210 by 2019, and also additional yearly indirect costs on goods and services of $75 in 2019.